How much to insure for critical illness?

Dear Mr Tan,

You recommend that $50,000 is sufficient for critical illness cover. May I know how you derive this amount?

In my opinion, if I am diagnosed with a critical illness eg cancer, I would have to stop working. I would probably need $2,000 a month to support myself for 5 years, while waiting to see if the cancer would go into remission. Thus, the amount of my critical illness cover should be $2,000 x 5 years = $120,000.

Please advise if my scenario is realistic and reasonable?

REPLY

Critical illness coverage is expensive. A significant portion of the premium goes for marketing and other expenses. If you spend too much on it, you have less money to save for your other needs.

If you spend less on critical illness insurance, you will have more money to save and invest. This will allow you to accumulate savings which can be drawn down for all kinds of emergency (including critical illness), and also for retirement.

I am not aware of many people who have to suffer a critical illness for 5 years. Have you come across many people in this situation?

If the illness is serious, they will pass away and the family can claim under the life insurance policy. If the critical illness is not serious, they can be cured within a shorter time.

However, if you feel that there is a need to insure for a larger sum, it is all right. It is a question of getting the right balance.